van-der-veerThe outgoing CEO of oil giant Shell, Jeroen van der Veer, has warned of “oil spikes” in the years to come as investment in the oil industry fails to keep up with demand.

“There are going to be six to nine billion people by 2050 and it means more energy use, especially in this part of the world,” said Shell’s chief executive Jeroen van der Veer, at the 14th Annual Asia Oil & Gas Conference in Kuala Lumpur.

To meet this demand Shell is banking on two sources of energy. The first is LNG –liquified natural gas and the second is heavy oils, such as tar sands.  The problem for Shell is that both of these are highly energy intensive. It takes a huge amount of energy to take gas, cool it to a liquid and then ship it around the world and then un-cool it again.

Despite this unconformable truth, van der Veer said that LNG, that only accounts for about 2 percent of world energy supply, is “a growth industry for decades to come. We continue to see high demand for LNG.”  “There is a mismatch between where the gas is found and the market for the gas,” he said. “A lot of places need a lot of LNG ships.”

van der Veer also admitted that the company would wait until the economics is right before advancing some of its tar sands and LNG projects. “If I feel that by waiting, costs will be lower, I prefer to wait. Because oil sands are projects built for decades. Over time, I am convinced, the Canadians will have more capacity to build projects.”

Shell may be waiting for the costs to come down to expand its tar sands business, but over time the tide is beginning to turn against further oil sands development. The Pembina Institute, the respected environmental watchdog on tar sands, has just issued another report criticising some of the myths being perpetuated by Shell and the Canadians in support of further tar sands development.

Whilst tar sands developers like Shell and the Canadian government try to greenwash tar sands and downplay its environmental impact, especially over climate change, the new Pembina report argues: “The oil sands operations are the largest source of projected new greenhouse gas pollution in Canada. This is the number one reason Alberta and Canada’s emissions are rising instead of falling.”

It also criticises CCS – carbon capture and storage – that Shell continues to see as the panacea to its tar sands operations. For example in his speech, van der Veer said: “Another crucial contribution to cleaner fossil fuels could come from CO2 Capture and Storage, or CCS … we need CCS to tackle emissions from power stations and big industrial installations” [ie tar sands].

However, Pembina criticises this dependence on CCS. For carbon capture and storage (CCS) to be implemented on a large scale in the oil sands, federal and/or provincial governments would have to put a price on emissions about five times higher than they have proposed to date. Very large investments would need to be made, and significant technical challenges overcome. Current government policies are not close to making this happen.”

It’s amazing that something that is “Not even close” is what a company like Shell is basically banking its future on….

Doesn’t make sense to me..